Foreign Arbitration Award Upheld; Petition Dismissed as Not Maintainable

The court dismissed Arbitration Petition No.76 of 2012 as not maintainable under Section 34 of the Arbitration and Conciliation Act, 1996. Arbitration Petition No.12 of 2012 was allowed, making the foreign award enforceable. The petitioners were directed to comply with the award, and no costs were awarded.

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Issues Involved:

1. Maintainability of Arbitration Petition No.76 of 2012 under Section 34 of the Arbitration and Conciliation Act, 1996.
2. Existence of a valid arbitration agreement between the parties.
3. Composition and jurisdiction of the arbitral tribunal.
4. Enforcement of the foreign award under Part II of the Arbitration and Conciliation Act, 1996.
5. Compliance with Foreign Exchange Management (Guarantees) Regulations, 2000.

Detailed Analysis:

1. Maintainability of Arbitration Petition No.76 of 2012:

The court examined whether Arbitration Petition No.76 of 2012, filed under Section 34 of the Arbitration and Conciliation Act, 1996, challenging the foreign award, was maintainable. It was established that the arbitration proceedings were governed by English law and held in London, making the award a foreign award. The court held that Part I of the Arbitration and Conciliation Act, 1996, including Section 34, did not apply to foreign awards. The petitioners had not challenged the declaratory arbitration award under the English Arbitration Act, thus losing their right to object to the final award. The court concluded that the petition under Section 34 was not maintainable.

2. Existence of a Valid Arbitration Agreement:

The court addressed the petitioners' contention that there was no valid arbitration agreement between the parties. The petitioners argued that the letter of guarantee did not incorporate the arbitration clause from the charter party agreement. However, the court found that the arbitration agreement in the charter party, which included the Gencon terms, was incorporated into the letter of guarantee. The petitioners were aware of the arbitration clause and had acted as managers for D.B. Shipping LLC. The arbitral tribunal's finding that the arbitration agreement existed was upheld.

3. Composition and Jurisdiction of the Arbitral Tribunal:

The petitioners challenged the composition and jurisdiction of the arbitral tribunal, arguing that the tribunal was not constituted in accordance with the agreement. The court noted that both parties had nominated their arbitrators, and the chairman was appointed by the nominee arbitrators, in accordance with the English Arbitration Act. The tribunal had already ruled on its jurisdiction in the declaratory award, which was not challenged by the petitioners. The court held that the petitioners could not re-litigate this issue.

4. Enforcement of the Foreign Award:

The court examined the enforceability of the foreign award under Part II of the Arbitration and Conciliation Act, 1996. It was established that the foreign award was binding and enforceable. The court rejected the petitioners' objections based on the alleged non-existence of an arbitration agreement and improper composition of the tribunal. The court emphasized that the grounds for refusing enforcement under Section 48 are limited and do not permit a re-examination of the merits of the award.

5. Compliance with Foreign Exchange Management (Guarantees) Regulations, 2000:

The petitioners argued that the letter of guarantee was issued in violation of the Foreign Exchange Management (Guarantees) Regulations, 2000, as no prior permission from the Reserve Bank of India (RBI) was obtained. The court referred to the Division Bench judgment in Videocon Industries Ltd. v. Intesa Sanpaolo S.P.A., which held that prior permission from the RBI was not required for issuing such guarantees. The court found that the petitioners had not raised this issue at any stage before the arbitral tribunal or earlier, and it could not be raised at this stage. The court concluded that the enforcement of the award was not contrary to the fundamental policy of Indian law or public policy.

Conclusion:

The court dismissed Arbitration Petition No.76 of 2012 as not maintainable under Section 34 of the Arbitration and Conciliation Act, 1996. Arbitration Petition No.12 of 2012 was allowed, making the foreign award enforceable. The petitioners were directed to comply with the award, and no costs were awarded.

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